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Revolve’s Shares Soar in First Day of Trading

The e-tailer overcame some early investor scepticism about its model, closing its first day of trading at almost 90 percent higher than its IPO price.
A Revolve banner outside the New York Stock Exchange | Source: Facebook
By
  • Rachel Strugatz

NEW YORK, United States – Revolve's stock nearly doubled in its first day of trading on the New York Stock Exchange Friday, as investors flocked to the fast-growing — and profitable — online fashion retailer.

Trading under the symbol RVLV, shares ended the day at $34, a nearly 90 percent increase from their IPO price of $18. Revolve raised $212 million, and ended the day with a market capitalisation of $1.4 billion.

Revolve has profited off the social media boom like few other retailers have, relying on a network of 2,500 influencers to sell clothing, accessories and beauty products from hundreds of designers as well as the company’s own private labels. Sales jumped 25 percent in 2018 to $500 million, and the company reported a $31 million profit.

Revolve’s profitability likely played a role in its warm reception in the market. It’s been a banner year for IPOs, but many of the highest-profile listings have come from start-ups operating deep in the red, including ride-sharing apps Uber and Lyft. Shares in those companies fell after they began trading, while profitable companies, including Zoom Video Communications, have performed better.

Still, the fashion retailer had to overcome some investor scepticism about its model. Revolve initially announced its IPO last fall, but delayed plans to go public amid concerns about the health of its wholesale business as well as “pure play” retailers (Revolve generates all of its sales online). The company’s strong 2018 results, and new details about its private-label plans, put many of those concerns to rest.

“At any given moment we’ll have over 40,000 products available for sale ... there’s new product every day on the site,” said Michael Mente, co-chief executive of Revolve, told BoF during an interview at the New York Stock Exchange on Friday. “Across 40,000 styles there is not much risk – there’s true diversification whereas in physical retail you’re limited to a few hundred stock keeping units (SKUs) and those few hundred SKUs have to be the right ones.”

He added: “If people are sceptical about pureplays there’s probably no convincing them at this point,” though he didn’t rule out the idea of eventually opening brick-and-mortar stores.

Revolve carries about 500 brands and maintains a portfolio of over 20 private labels, which reported $154 million in net sales last year, or 31 percent of Revolve's total net sales. Revolve's recent private labels include a line launched in collaboration with mega influencer Aimee Song and Superdown, a Gen Z-targeted fast-fashion label sold on its own site.

Revolve’s connection with young consumers separates it from other multi-brand retailers, said Michael Karanikolas, co-chief executive of Revolve.

“This younger generation of consumers is really key to our success, traditional and legacy retailers are really failing to connect with this generation,” Karanikolas said.

In an April interview, Brian Owens, vice president of retail insights at Kantar, said Revolve’s own brands – even more so than its assortment of third-party labels – could be a powerful tool in attracting customers who might have fatigue from seeing the same wholesale brands at multiple retailers.

To that point, Mente said last month’s release of Song’s Song of Style x Revolve collection was the “best launch of any brand we’ve ever had on the site in 16 years.” He declined to give sales figures, but given the initial success with Song, influencer fronted brands are a strategy Revolve plans to run with. On June 19, Revolve’s second influencer line with Camila Coelho will bow on the site.

“The best product will drive the best outcome over the long term so we’re always focused on third-party product and bringing that in…but it’s [important] that a lot of the best product really is our own product,” Mente said. “All of our key metrics with our own brands show our consumers love our product…high engagement, great site traffic and ultimately it’s a really important part of the business. We know that we can continue to grow it."

According to the filing, one-quarter of Class A shares issued in the IPO were sold by Revolve, with the current $8.8 million shares sold by current investors. Karanikolas and Mente control 67 percent of the voting power. Bank of America Corp., Credit Suisse Group AG and Morgan Stanley led the offering.

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State of Fashion 2023
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State of Fashion 2023